EUR/USD resumes downside towards 1.1200 ahead of key event risks

• EUR/USD stalls correction, back in the red towards 1.1200.
• The US dollar index holds firmer while Treasury yields tumble.
• Key event risks loom, with the Fed minutes eagerly awaited.

EUR/USD is under renewed selling pressure, eyeing 1.1200 once again ahead of a busy session. The US dollar remains firmer amid hopes of an earlier Fed rate hike, which could get confirmed by the FOMC minutes.

The pair, however, could limit the downside amid weaker Treasury yields. The risk-averse market conditions boost the safe-haven flows into the US Treasuries, knocking down the yields. The benchmark 10-year yields drop 1.66% on the day to trade at 1.637%, as of writing.

The sentiment remains damp as markets assess the economic implications of a sooner-than-expected Fed’s monetary policy normalization. Investors also remain wary over the renewed curbs to contain rising COVID-19 cases in Europe, as the Fed-ECB monetary policy divergence continues to play out.

Ahead of the Fed minutes, the German IFO Survey and the US data flow will offer fresh trading opportunities for the EUR/USD traders.

Looking at the four-hour chart, the pair is resuming the downtrend on Wednesday, looking to test the falling trendline support at 1.1211 after facing rejection at 1.1275.

If the critical support line gives way, then a steep sell-off towards the 1.1150 psychological level cannot be ruled out.

The Relative Strength Index (RSI) is trading flat just above the oversold territory, backing the case for a potential move lower.

EUR/USD: Four-hour chart

On the flip side, any meaningful recovery will gain traction on recapturing the bearish 21-Simple Moving Average (SMA) at 1.1269, above which Tuesday’s high will get retested.

Further up, the bearish 50-SMA at 1.1329 will be on the buyers’ radars if the 1.1300 level is scaled on a sustained basis.

EUR/USD: Additional levels to consider